It seemed like such a simple question: “How much money is in the world?” The answer is, it depends.
It all depends on how we want to define “money” to answer the question. Not that anyone has sat with a calculator and counted dimes, but it is estimated that there is about $6 trillion (1 thousand x 1 billion) coins and bank notes in the world. “But”, one might say, “I don’t carry all of the money I have on me. What about what I have in my retirement accounts, bank, investments, home equity, etc?” Taking those assets into account bumps the total sum of money in the world to about $60 trillion.
Then how do we categorize debt? What we owe on our house is a debt of ours, but an asset to the bank (they either get paid or they get the house). Then we get into the realms of what borrowers owe their lenders, companies and countries owe their bondholders, and what governments owe each other. Estimates peg that number to be about $199 trillion.
That leads me to remember Wimpy, Popeye’s old friend. Wimpy was perpetually hungry but continually underfunded. He was famous for the simply stated line: “I’ll gladly pay you Tuesday for a hamburger today.” I could find no evidence of anyone ever funding Wimpy’s purchases, but he had a hamburger in hand in every picture I could find, and Tuesday never seemed to come around.
Ultimately, I see this as a matter of trust. While we trust the Bank can come up with the cash in our accounts if we want it, they trust me not to trash the house they hold as collateral. I trust that the custodians of my 401k can fund my retirement, just as the people on their end do as well. I trust that the grocery store will be stocked when I need something, so I don’t have to store vegetables for the winter.
We can debate whether that is advancement or decline, but it does seem to be the world we live in now. This snippet from the Wall Street Journal seemed to summarize it well: “Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow...it cost him six months of his life and set him back $1,500. The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own cloths. It was a time of unimaginable poverty and labor without rest.”
To test the system, withdraw some money from the bank, look for the word “trust” on the back, and see if the kid behind the counter trusts your currency enough to give you a sandwich. I would love to hear the outcome of your experiment.
Bryan Trible, CLU
Chartered Retirement Planning Counselor